UNITED STATES

                  SECURITIES AND EXCHANGE COMMISSION

                       Washington,  D.C.  20549

                               FORM 10Q

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934

          For the quarterly period ended September 30, 2005

                                  OR

[  ] Transition Report Pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934

        For the transition period from _________ to _________


                   Commission File Number: 2-88927


                      FIRST KEYSTONE CORPORATION
        (Exact name of registrant as specified in its charter)


         Pennsylvania                          23-2249083
 (State or other jurisdiction of            (I.R.S. Employer
 incorporation or organization)             identification No.)


111 West Front Street, Berwick, PA          18603
(Address of principal executive offices)    (Zip Code)


 Registrant's telephone number, including area code:  (570) 752-3671


Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.

                      Yes  [X]        No  [  ]

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rul 12b-2 of the Exchange Act).

                      Yes  [X]        No  [  ]


The number of shares outstanding of the issuer's common stock as of
November 1, 2005, was 4,392,520.


<PAGE>


                   PART I. - FINANCIAL INFORMATION

Item. 1  Financial Statements

<TABLE>

                 FIRST KEYSTONE CORPORATION AND SUBSIDIARY
                        CONSOLIDATED BALANCE SHEETS

<CAPTION>

(Amounts in thousands)
                                                  September       December
                                                     2005          2004
                                                 (Unaudited)

                                           <c>             <c>
ASSETS
Cash and due from banks                            $  7,688        $  6,150
Interest bearing deposits with banks                 11,774              36
Investment securities, available for
   sale securities carried at
   estimated fair value                             253,532         235,692
Investment securities, held to
   maturity securities, estimated
   fair value of $3,257 and $3,364                    3,257           3,361
Loans, net of unearned income                       232,084         233,800
Allowance for loan losses                            (3,677)         (3,828)
                                                   ________        ________
Net loans                                          $228,407        $229,972
                                                   ________        ________
Bank premises and equipment net                       5,130           5,369
Other real estate owned                                 216               0
Accrued interest receivable                           2,517           2,727
Cash surrender value of bank
   owned life insurance                              11,357          11,033
Goodwill                                              1,224           1,224
Other assets                                          1,620           2,051
                                                   ________        ________
   TOTAL ASSETS                                    $526,722        $497,615
                                                   ========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
   Non-interest bearing                            $ 42,573        $ 35,803
   Interest bearing                                 333,040         322,153
                                                   ________        ________
      TOTAL DEPOSITS                               $375,613        $357,956
Short-term borrowings                                12,490          15,512
Long-term borrowings                                 65,535          66,910
Accrued interest and other expenses                   2,214           1,877
Other liabilities                                    16,193           2,048
                                                   ________        ________
      TOTAL LIABILITIES                            $472,045        $444,303

STOCKHOLDERS' EQUITY
Common stock, par value $2 per share               $  9,079        $  9,079
Surplus                                              12,389          12,505
Retained earnings                                    35,088          32,469
Accumulated other comprehensive income                2,530           3,767
Less treasury stock at cost 147,053
   shares in 2005 and  148,264 in 2004               (4,409)         (4,508)
                                                   ________        ________
   TOTAL STOCKHOLDERS' EQUITY                      $ 54,677        $ 53,312
                                                   ________        ________
   TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                         $526,722        $497,615
                                                   ========        ========

See Accompanying Notes to Consolidated Financial Statements

</TABLE>

                                1
<PAGE>

<TABLE>

                 FIRST KEYSTONE CORPORATION AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF INCOME
          FOR THE THREE MONTHS ENDED September 30, 2005 AND 2004
                                (Unaudited)

<CAPTION>

(Amounts in thousands except per share data)

                                                  2005            2004

                                            <c>             <c>
INTEREST INCOME
Interest and fees on loans                           $3,746          $3,673
Interest and dividend income
   on securities                                      2,887           2,649
Deposits in banks                                         4              11
                                                     ______          ______
   TOTAL INTEREST INCOME                             $6,637          $6,333
                                                     ______          ______
INTEREST EXPENSE
Deposits                                             $2,080          $1,745
Short-term borrowings                                   164              35
Long-term borrowings                                    737             737
                                                     ______          ______
   TOTAL INTEREST EXPENSE                            $2,981          $2,517
                                                     ______          ______
   Net interest income                               $3,656          $3,816
Provision for loan losses                               150             675
                                                     ______          ______
   NET INTEREST INCOME AFTER
      PROVISION FOR LOAN LOSSES                      $3,506          $3,141
                                                     ______          ______
NON-INTEREST INCOME
Trust department                                     $  106          $  115
Service charges and fees                                586             581
Bank owned life insurance income                        109             112
Gain on sale of loans                                    14              83
Investment securities gains
   (losses) - net                                        89             411
Other                                                    11              11
                                                     ______          ______
   TOTAL NON-INTEREST INCOME                         $  915          $1,313
                                                     ______          ______
NON-INTEREST EXPENSES
Salaries and employee benefits                       $1,144          $1,126
Occupancy, net                                          152             177
Furniture and equipment                                 148             182
Professional services                                    99             146
State shares tax                                        121             112
Other                                                   581             523
                                                     ______          ______
   TOTAL NON-INTEREST EXPENSES                       $2,245          $2,266
                                                     ______          ______
Income before income taxes                           $2,176          $2,188
Income tax expense                                      372             398
                                                     ______          ______
Net Income                                           $1,804          $1,790
                                                     ======          ======
PER SHARE DATA
   Basic                                             $  .41          $  .41
   Diluted                                              .41             .41
   Cash dividends per share                             .20             .18


See Accompanying Notes to Consolidated Financial Statements


</TABLE>

                                  2
<PAGE>

<TABLE>

                 FIRST KEYSTONE CORPORATION AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF INCOME
           FOR THE NINE MONTHS ENDED September 30, 2005 AND 2004
                                (Unaudited)

<CAPTION>

(Amounts in thousands except per share data)

                                                 2005              2004

                                           <c>             <c>
INTEREST INCOME
Interest and fees on loans                         $10,985         $10,878
Interest and dividend income
   on securities                                     8,537           7,936
Deposits in banks                                       44              26
Interest on federal funds sold                           3               0
                                                   _______         _______
   TOTAL INTEREST INCOME                           $19,569         $18,840
                                                   _______         _______
INTEREST EXPENSE
Deposits                                           $ 5,804         $ 5,127
Short-term borrowings                                  324             102
Long-term borrowings                                 2,265           2,159
                                                   _______         _______
   TOTAL INTEREST EXPENSE                          $ 8,393         $ 7,388
                                                   _______         _______

   Net interest income                             $11,176         $11,452
Provision for loan losses                              500             950
                                                   _______         _______
   NET INTEREST INCOME AFTER
      PROVISION FOR LOAN LOSSES                    $10,676         $10,502
                                                   _______         _______
NON-INTEREST INCOME
Trust department                                   $   358         $   414
Service charges and fees                             1,634           1,637
Bank owned life insurance income                       324             336
Gain on sale of loans                                   54             181
Investment securities gains
   (losses) - net                                      232             576
Other                                                   32              61
                                                   _______         _______
   TOTAL NON-INTEREST INCOME                       $ 2,634         $ 3,205
                                                   _______         _______
NON-INTEREST EXPENSE
Salaries and employee benefits                     $ 3,669         $ 3,610
Occupancy, net                                         431             502
Furniture and equipment                                499             542
Professional services                                  300             319
State shares tax                                       360             334
Other                                                1,706           1,582
                                                   _______         _______
   TOTAL NON-INTEREST EXPENSES                     $ 6,965         $ 6,889
                                                   _______         _______

Income before income taxes                         $ 6,345         $ 6,818
Income tax expense                                   1,089           1,384
                                                   _______         _______
Net Income                                         $ 5,256         $ 5,434
                                                   =======         =======
PER SHARE DATA
   Basic                                           $  1.20         $  1.24
   Diluted                                            1.19            1.23
   Cash Dividends                                      .60             .53

See Accompanying Notes to Consolidated Financial Statements


</TABLE>

                                  3
<PAGE>

<TABLE>

                 FIRST KEYSTONE CORPORATION AND SUBSIDIARY
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE NINE MONTHS ENDED September 30, 2005 AND 2004
                                (Unaudited)
<CAPTION>

(Amounts in thousands)
                                                  2005            2004

                                          <c>               <c>
OPERATING ACTIVITIES
Net income                                        $   5,256         $  5,434
Adjustments to reconcile net
   income to net cash provided
   by operating activities:
   Provision for loan losses                            500              950
   Stock option expense                                   0               48
   Provision for depreciation and
      amortization                                      409              447
   Premium amortization on investment
      securities                                        318              626
   Accretion of core deposit net
      discount                                          (65)             (71)
   Discount accretion on investment
      securities                                       (522)            (389)
   Gain on sale of mortgage loans                       (54)            (181)
   Proceeds from sale of mortgage loans               3,930           11,669
   Originations of mortgage loans
      for resale                                     (4,512)          (4,941)
   (Gain) loss on sales of investment
      securities                                       (232)            (576)
   Deferred income tax (benefit)                         (6)            (313)
   (Increase) decrease in interest
      receivable and other assets                       664               (4)
   Increase in cash surrender value
      of bank owned life insurance                     (324)            (336)
   Increase (decrease) in interest
      payable, accrued expenses and
      other liabilities                                 210              353
                                                  _________         ________
   Net Cash Provided by Operating
      Activities                                  $   5,572         $ 12,716
                                                  _________         ________
INVESTING ACTIVITIES
   Purchases of investment
      securities available-for-sale               $(105,676)        $(67,902)
   Purchase of investment
      securities held-to-maturity                         0           (1,630)
   Proceeds from sales of investment
      securities available-for-sale                  71,423           40,845
   Proceeds from maturities and
      redemptions of investment
      securities available-for-sale                  29,858           22,616
   Proceeds from maturities and
      redemption of investment
      securities held-to-maturity                       104            5,490
   Net (increase) decrease in loans                   1,486          (11,643)
   Purchase of premises and equipment                   (97)            (871)
   Final settlement on acquisition
      of branch                                           0             (414)
                                                  _________         ________
   Net Cash Used by Investing
      Activities                                  $  (2,902)        $(13,509)

FINANCING ACTIVITIES
   Net increase (decrease)
      in deposits                                 $  17,657         $  9,912
   Net increase (decrease) in
      short-term borrowings                          (3,022)          (2,485)
   Net increase (decrease) in
      long-term borrowings                           (1,375)           3,965
   Acquisition of treasury stock                       (112)               0
   Proceeds from sale of
      treasury stock                                     95               45
   Cash dividends                                    (2,637)          (2,340)
   Dividend paid in lieu of
      fractional shares                                   0               (3)
                                                  _________         ________
   Net Cash Provided by
      Financing Activities                        $  10,606         $  9,094
   Increase (Decrease) in Cash
      and Cash Equivalents                           13,276            8,301
Cash and Cash Equivalents,
   Beginning                                          6,186            5,941
                                                  _________         ________
Cash and Cash Equivalents,
   Ending                                         $  19,462         $ 14,242
                                                  =========         ========

SUPPLEMENTAL DISCLOSURE OF
   CASH FLOW INFORMATION
   Cash paid during period for:
      Interest                                    $   8,233         $  7,419
      Income Taxes                                      556            1,562


See Accompanying Notes to Consolidated Financial Statements


</TABLE>

                                  4

<PAGE>


                      FIRST KEYSTONE CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 2005
                             (Unaudited)

Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting policies of First Keystone Corporation and
Subsidiary (the "Corporation") are in accordance with accounting
principles generally accepted in the United States of America and
conform to common practices within the banking industry. The more
significant policies follow:

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of
First Keystone Corporation and its wholly owned Subsidiary, The
First National Bank of Berwick (the "Bank"). All significant inter
company balances and transactions have been eliminated in
consolidation.

NATURE OF OPERATIONS

     The Corporation, headquartered in Berwick, Pennsylvania,
provides a full range of banking, trust and related services through
its wholly-owned Bank subsidiary and is subject to competition from
other financial institutions in connection with these services. The
Bank serves a customer base which includes individuals, businesses,
public and institutional customers primarily located in the
Northeast Region of Pennsylvania. The Bank has 10 full service
offices and 13 ATMs located in Columbia, Luzerne and Montour
Counties. The Corporation and its subsidiary must also adhere to
certain federal banking laws and regulations and are subject to
periodic examinations made by various federal agencies.

SEGMENT REPORTING

     The Corporation's banking subsidiary acts as an independent
community financial services provider, and offers traditional
banking and related financial services to individual, business and
government customers. Through its branch and automated teller
machine network, the Bank offers a full array of commercial and
retail financial services, including the taking of time, savings and
demand deposits; the making of commercial, consumer and mortgage
loans; and the providing of other financial services. The Bank also
performs personal, corporate, pension and fiduciary services through
its Trust Department.

     Management does not separately allocate expenses, including the
cost of funding loan demand, between the commercial, retail, trust
and mortgage banking operations of the Corporation. Currently,
management measures the performance and allocates the resources of
First Keystone Corporation as a single segment.

USE OF ESTIMATES

     The preparation of these consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America, requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of these consolidated financial statements and the reported
amounts of income and expenses during the reporting periods. Actual
results could differ from those estimates.


                                 5

<PAGE>


INVESTMENT SECURITIES

     The Corporation classifies its investment securities as either
"Held to Maturity" or "Available for Sale" at the time of purchase.
Debt securities are classified as Held to Maturity when the
Corporation has the ability and positive intent to hold the
securities to maturity. Investment securities Held to Maturity are
carried at cost adjusted for amortization of premium and accretion
of discount to maturity.

     Debt securities not classified as Held to Maturity and equity
securities are included in the Available for Sale category and are
carried at fair value. The amount of any unrealized gain or loss,
net of the effect of deferred income taxes, is reported as other
comprehensive income (loss) (see Note 6).  Management's decision to
sell Available for Sale securities is based on changes in economic
conditions controlling the sources and applications of funds, terms,
availability of and yield of alternative investments, interest rate
risk and the need for liquidity.

     The cost of debt securities classified as Held to Maturity or
Available for Sale is adjusted for amortization of premiums and
accretion of discounts to expected maturity. Such amortization and
accretion, as well as interest and dividends is included in interest
and dividend income on securities.  Realized gains and losses are
included in net investment securities gains and losses. The cost of
investment securities sold, redeemed or matured is based on the
specific identification method.

LOANS

     Loans are stated at their outstanding unpaid principal
balances, net of deferred fees or costs, unearned income and the
allowance for loan losses. Interest on installment loans is
recognized as income over the term of each loan, generally, by the
"actuarial method". Interest on all other loans is primarily
recognized based upon the principal amount outstanding on an actual
day basis. Loan origination fees and certain direct loan origination
costs have been deferred with the net amount amortized using the
interest method over the contractual life of the related loans as an
interest yield adjustment.

     Mortgage loans held for resale are carried at the lower of cost
or market on an aggregate basis. These loans are sold without
recourse to the Corporation.

Past-Due Loans - Generally, a loan is considered to be past due when
scheduled loan payments are in arrears 15 days or more. Delinquent
notices are generated automatically when a loan is 15 days past due,
depending on the type of loan. Collection efforts continue on loans
past due beyond 60 days that have not been satisfied, when it is
believed that some chance exists for improvement in the status of
the loan. Past due loans are continually evaluated with the
determination for charge off being made when no reasonable chance
remains that the status of the loan can be improved.

Non-Accrual Loans - Generally, a loan is classified as non accrual
and the accrual of interest on such a loan is discontinued when the
contractual payment of principal or interest has become 90 days past
due or management has serious doubts about further collectibility of
principal or interest, even though the loan currently is performing.
A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is
placed on non accrual status, unpaid interest credited to income in
the current year is reversed and unpaid interest accrued in prior
years is charged against the allowance for loan losses. Certain non
accrual loans may continue to perform, that is, payments are still
being received. Generally, the payments are applied to principal.
These loans remain under constant scrutiny and if performance
continues, interest income may be recorded on a cash basis based on
management's judgement as to collectibility of principal.

Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against
income. Loans deemed to be uncollectible are charged against the
allowance for loan losses and subsequent recoveries, if any, are
credited to the allowance.


                                 6

<PAGE>


     A principal factor in estimating the allowance for loan losses
is the measurement of impaired loans. A loan is considered impaired
when, based on current information and events, it is probable that
the Corporation will be unable to collect all amounts due according
to the contractual terms of the loan agreement. Under current
accounting standards, the allowance for loan losses related to
impaired loans is based on discounted cash flows using the effective
interest rate of the loan or the fair value of the collateral for
certain collateral dependent loans.

     The allowance for loan losses is maintained at a level
estimated by management to be adequate to absorb potential loan
losses. Management's periodic evaluation of the adequacy of the
allowance for loan losses is based on the Corporation's past loan
loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay
(including the timing of future payments), the estimated value of
any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material
estimates including the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to
significant change.

DERIVATIVES

     The Bank has outstanding loan commitments that relate to the
origination of mortgage loans that will be held for resale.
Pursuant to Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities"
as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities" and the guidance
contained within the Derivatives Implementation Group Statement 133
Implementation Issue No. C 13, the Bank has accounted for such loan
commitments as derivative instruments.  The outstanding loan
commitments in this category did not give rise to any losses for the
nine month period ended September 30, 2005 and year ended December
31, 2004, as the fair market value of each outstanding loan
commitment exceeded the Bank's cost basis in each outstanding loan
commitment.

PREMISES AND EQUIPMENT

     Premises, improvements and equipment are stated at cost less
accumulated depreciation computed principally on the straight line
method over the estimated useful lives of the assets. Long lived
assets are reviewed for impairment whenever events or changes in
business circumstances indicate that the carrying value may not be
recovered.  Maintenance and minor repairs are charged to operations
as incurred. The cost and accumulated depreciation of the premises
and equipment retired or sold are eliminated from the property
accounts at the time of retirement or sale, and the resulting gain
or loss is reflected in current operations.

MORTGAGE SERVICING RIGHTS

     The Corporation originates and sells real estate loans to
investors in the secondary mortgage market. After the sale, the
Corporation may retain the right to service these loans. When
originated mortgage loans are sold and servicing is retained, a
servicing asset is capitalized based on relative fair value at the
date of sale. Servicing assets are amortized as an offset to other
fees in proportion to, and over the period of, estimated net
servicing income. The unamortized cost is included in other assets
in the accompanying consolidated balance sheet. The servicing rights
are periodically evaluated for impairment based on their relative
fair value.

FORECLOSED REAL ESTATE

     Real estate properties acquired through, or in lieu of, loan
foreclosure are held for sale and are initially recorded at fair
value on the date of foreclosure establishing a new cost basis.
After foreclosure, valuations are periodically performed by
management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell and is included in other
assets. Revenues derived from and costs to maintain the assets and
subsequent gains and losses on sales are included in other non
        interest income and expense.


                                 7

<PAGE>


BANK OWNED LIFE INSURANCE

     The Corporation invests in Bank Owned Life Insurance (BOLI)
with split dollar life provisions.  Purchase of BOLI provides life
insurance coverage on certain employees with the Corporation being
owner and beneficiary of the policies.

INVESTMENTS IN REAL ESTATE VENTURES

     The Bank is a limited partner in  real estate ventures that own
and operate affordable residential low income housing apartment
buildings for elderly residents. The investments are accounted for
under the effective yield method under the Emerging Issues Task
Force (EITF) 94-1, "Accounting for Tax Benefits Resulting from
Investments in Affordable Housing Projects". Under the effective
yield method, the Bank recognizes tax credits as they are allocated
and amortizes the initial cost of the investment to provide a
constant effective yield over the period that the tax credits are
allocated to the Bank.  Under this method, the tax credits
allocated, net of any amortization of the investment in the limited
partnerships, are recognized in the consolidated statements of
income as a component of income tax expense.  The amount of tax
credits allocated to the Bank were $128,000 in 2005 and 2004.  The
amortization of the investments in the limited partnerships was
$72,000 and $92,000 for the nine months ended September 30, 2005 and
2004, respectively.  The carrying value of the investments as of
September 30, 2005 and December 31, 2004 was $719,000 and $791,000,
respectively and is carried in other assets in the accompanying
consolidated balance sheets.

INCOME TAXES

     The provision for income taxes is based on the results of
operations, adjusted primarily for tax-exempt income. Certain items
of income and expense are reported in different periods for
financial reporting and tax return purposes. Deferred tax assets and
liabilities are determined based on the differences between the
consolidated financial statement and income tax bases of assets and
liabilities measured by using the enacted tax rates and laws
expected to be in effect when the timing differences are expected to
reverse. Deferred tax expense or benefit is based on the difference
between deferred tax asset or liability from period to period.

GOODWILL, OTHER INTANGIBLE ASSETS, AND PREMIUM DISCOUNT

     Goodwill resulted from the acquisition of certain fixed and
operating assets acquired and deposit liabilities assumed of the
branch of another financial institution in Danville, Pennsylvania,
in January 2004.  Such goodwill represents the excess cost of the
acquired assets relative to the assets fair value at the date of
acquisition.  The Corporation accounts for goodwill pursuant to the
Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Intangible Assets".  SFAS No. 142 includes
requirements to test goodwill for impairments rather than to
amortize goodwill.  The Corporation has tested the goodwill included
in its consolidated balance sheet at December 31, 2004, and has
determined there was no impairment as of that date.

     Intangible assets are comprised of core deposit intangibles and
premium discount (negative premium) on acquired certificates of
deposit acquired in January 2004 when the Bank assumed deposit
accounts of the branch of another financial institution.  The core
deposit intangible is being amortized over the average life of the
deposits acquired as determined by an independent third party.
Premium discount (negative premium) on acquired certificates of
deposit resulted from the valuation of certificate of deposit
accounts by an independent third party which were part of the
deposit accounts assumed of the branch by another financial
institution.  The book value of certificates of deposit acquired was
greater than their fair value at the date of acquisition which
resulted in a negative premium due to higher cost of the
certificates of deposit compared to the cost of similar term
financing.


                                 8

<PAGE>


STOCK BASED COMPENSATION

     The Corporation had accounted for stock options and shares
issued under the Stock Option Incentive Plan through December 31,
2002 in accordance with Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees". Under this
method no compensation expense is recognized for stock options when
the exercise price equals the fair value of the options at the grant
date. Under provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock Based Compensation",
the fair value of a stock option is required to be recognized as
compensation expense over the service period (generally the vesting
period). As permitted under SFAS No. 123 the Corporation had elected
to continue to account for its stock option plan in accordance with
APB No. 25.

     As of the first quarter 2003, the Corporation adopted Statement
of Financial Accounting Standards (SFAS) No. 148, "Accounting for
Stock Based Compensation - Transition and Disclosures - an amendment
of FASB Statement No. 123" and also follows the guidance in SFAS No.
123R, effective for periods ending after June 15, 2005.  The
Corporation elected to use the "prospective method" of accounting
for stock options as allowed by the Standard. Accordingly,
compensation expense was recognized for the year ended December 31,
2004 in the amount of $48,000 being the vested portion attributable
to stock options granted in 2003.  No options were granted in 2004.

     Stock options were granted September 27, 2005 with a total
related compensation expense of $22,000.  The expense will be
recognized over the vesting period.  Accordingly, $11,000 will be
expensed in the fourth quarter of 2005 and the balance of $11,000
will be expensed in the first quarter of 2006.

PER SHARE DATA

     Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share", requires dual presentation of basic and fully
diluted earnings per share. Basic earnings per share is calculated
by dividing net income by the weighted average number of shares of
common stock outstanding at the end of each period. Diluted earnings
per share is calculated by increasing the denominator for the
assumed conversion of all potentially dilutive securities. The
Corporation's dilutive securities are limited to stock options.

CASH FLOW INFORMATION

     For purposes of reporting consolidated cash flows, cash and
cash equivalents include cash on hand and due from other banks and
interest bearing deposits in other banks. The Corporation considers
cash classified as interest bearing deposits with other banks as a
cash equivalent since they are represented by cash accounts
essentially on a demand basis.

TRUST ASSETS AND INCOME

     Property held by the Corporation in a fiduciary or agency
capacity for its customers is not included in the accompanying
consolidated financial statements since such items are not assets of
the Corporation. Trust Department income is generally  recognized on
a cash basis and is not materially different than if it were
reported on an accrual basis.

RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2004, the Financial Accounting Standards Board
(FASB) issued Staff Position No. 106-1, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003", which allows companies to recognize
or defer recognizing the effects of the Medicare Prescription Drug
Improvement and Modernization Act of 2003, or Medicare Act, for
annual financial statements of fiscal years ending after December 7,
2003.  The Medicare Act introduced both a Medicare prescription drug


                                 9

<PAGE>


benefit and a federal subsidy to sponsors of retiree health care
plans that provide a benefit at least "actuarially equivalent" to
the Medicare benefit.  These provisions of the Medicare Act affect
accounting measurements.  This standard does not have any material
impact on the Corporation's consolidated financial condition or
results of operations.

     In September 2004, the FASB issued Staff Position Emerging
Issues Task Force ("EITF") Issue No. 03-01, "Effective Date of
Paragraphs 10-20 of EITF Issue No. 03-01, The Meaning of Other Than
Temporary Impairment and Its Application to Certain Investments",
which delays the effective date for the measurement and recognition
guidance contained in EITF Issue No. 03-01.  EITF Issue No. 03-01
provides guidance for evaluating whether an investment is other than
temporarily impaired and was originally effective for other than
temporarily impaired evaluations made in reporting periods beginning
after June 15, 2004.  The delay in the effective date for the
measurement and recognition guidance contained in paragraphs 10
through 20 of EITF Issue No. 03-01 does not suspend the requirement
to recognize other than temporary impairment as required by existing
authoritative literature.  The disclosure guidance in paragraphs 21
and 22 of EITF Issue No. 03-01 remains effective.  The delay will be
superseded concurrent with the final issuance of EITF Issue No.
        03-01a, which is expected to provide implementation guidance on
matters such as impairment evaluations for declines in value caused
by increases in interest rates and/or sector spreads.

     In December 2004, the FASB issued Statement of Financial
Accounting Standards ("SFAS") No. 153, "Exchanges of Nonmonetary
Assets," which amends APB Opinion No. 29, "Accounting for
Nonmonetary Transactions".  SFAS No. 153 eliminates the exception
from fair value measurement for nonmonetary exchanges of similar
productive assets in Opinion No. 29 and replaces it with an
exception for exchanges that do not have commercial substance.  SFAS
No. 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange.  SFAS No. 153 is
effective for nonmenetary exchanges occurring in fiscal periods
beginning after June 15, 2005.  This standard did not have any
material impact on the Corporation's consolidated financial
condition or results of operations.

     In December 2004, the FASB issued SFAS No. 123 (revised 2004),
"Share Based Payment".  This Statement is a revision of SFAS No.
123, "Accounting for Stock Based Compensation", and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and its
related guidance.  SFAS No. 123 (revised 2004) established standards
for the accounting for transactions in which an entity exchanges its
equity instruments for goods and services.  This Statement requires
that the cost resulting from all share based payment transactions be
recognized in the financial statements.  This Statement established
fair value as the measurement objective in accounting for share
based payment arrangements and requires all entities to apply a fair
value based measurement method in accounting for share based payment
transactions with employees, except for equity instruments held by
employee share ownership plans.  This Statement is effective for
public entities that do not file as small business issuers as of the
beginning of the first interim or annual reporting period that
begins after June 15, 2005.  This standard did not have any material
impact on the Corporation's consolidated financial condition or
results of operations.

ADVERTISING COSTS

     It is the Corporation's policy to expense advertising costs in
the period in which they are incurred. Advertising expense for the
nine month period ended September 30, 2005 and 2004, was
approximately $173,000 and $232,000, respectively.

RECLASSIFICATIONS

     Certain amounts in the consolidated financial statements of
prior periods have been reclassified to conform with presentation
used in the 2005 consolidated financial statements. Such
reclassifications have no effect on the Corporation's consolidated
financial condition or net income.


                                 10

<PAGE>


Note 2.  ALLOWANCE FOR LOAN LOSSES

     Changes in the allowance for loan losses for the periods ended
September 30, 2005, and September 30, 2004, were as follows:

<TABLE>
<CAPTION>

(amounts in thousands)
                                                2005        2004
                                               ______       ______

                                       <c>           <c>
Balance, January 1                               $3,828        $3,524
Provision charged to operations                     500           950
Loans charged off                                  (678)         (195)
Recoveries                                           27            35
                                                               ______   ______
Balance, September 30                            $3,677        $4,314
                                                               ======   ======

</TABLE>

     At September 30, 2005, the total recorded investment in loans
that are considered to be impaired as defined by SFAS No. 114 was
$1,734,000.  These impaired loans had a related allowance for loan
losses of $140,000.  No additional charge to operations was required
to provide for the impaired loans since the total allowance for loan
losses is estimated by management to be adequate to provide for the
loan loss allowance required by SFAS No. 114 along with any other
potential losses.

  At September 30, 2005, there were no significant commitments
to lend additional funds with respect to non accrual and
restructured loans.

  Non accrual loans at September 30, 2005 and December 31, 2004
were $1,734,000 and $3,405,000, respectively, all of which were
considered impaired.

  Loans past due 90 days or more and still accruing interest
amounted to $31,000 and $69,000 on September 30, 2005 and December
31, 2004, respectively.

Note 3.  SHORT-TERM BORROWINGS

     Federal funds purchased, securities sold under agreements to
repurchase and Federal Home Loan Bank advances generally represent
overnight or less than 30 day borrowings. U.S. Treasury tax and loan
notes for collections made by the Bank are payable on demand.


Note 4.  LONG-TERM BORROWINGS

     Long-term borrowings are comprised of advances from the Federal
Home Loan Bank. Under terms of a blanket agreement, collateral for
the loans are secured by certain qualifying assets of the
Corporation's banking subsidiary which consist principally of first
mortgage loans and certain investment securities.


Note 5.  FINANCIAL INSTRUMENTS WITH OFF-BALANCE
         SHEET RISK AND CONCENTRATIONS OF CREDIT RISK

     The Corporation is a party to financial instruments with off
balance sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional amounts of
those instruments reflect the extent of involvement the Corporation
has in particular classes of financial instruments. The Corporation
does not engage in trading activities with respect to any of its
financial instruments with off balance sheet risk.


                                 11

<PAGE>


     The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is
represented by the contractual notional amount of those instruments.

     The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance
sheet instruments.

     The Corporation may require collateral or other security to
support financial instruments with off balance sheet credit risk.
The contract or notional amounts at September 30, 2005, and December
31, 2004, were as follows:

<TABLE>
<CAPTION>

(amounts in thousands)
                                          September 30,     December 31,
                                               2005             2004
                                               ____             ____

                                      <c>              <c>
Financial instruments whose
   contract amounts represent
   credit risk:
   Commitments to extend
      credit                                    $20,207          $22,363
   Financial standby letters
      of credit                                   1,251            1,760
   Performance standby
      letters of credit                             268              265

</TABLE>


     Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses that may require
payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Corporation
evaluates each customer's creditworthiness on a case by case basis.
The amount of collateral obtained, if deemed necessary by the
Corporation upon extension of credit, is based on management's
credit evaluation of the counter party. Collateral held varies but
may include accounts receivable, inventory, property, plant and
equipment, and income producing commercial properties.

     Standby letters of credit are conditional commitments issued by
the Corporation to guarantee the performance of a customer to a
third party. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan
facilities to customers. The Corporation may hold collateral to
support standby letters of credit for which collateral is deemed
necessary.

     The Corporation grants commercial, agricultural, real estate
mortgage and consumer loans to customers primarily in the counties
of Columbia, Luzerne, and Montour, Pennsylvania. It is management's
opinion that the loan portfolio was well balanced and diversified at
September 30, 2005, to the extent necessary to avoid any significant
concentration of credit risk. However, its debtors ability to honor
their contracts may be influenced by the region's economy.


                                 12

<PAGE>


Note 6.  STOCKHOLDERS' EQUITY

     Changes in Stockholders' Equity for the period ended September
30, 2005, were are follows:

<TABLE>
<CAPTION>

(Amounts in thousands, except common share data)

                                         Common          Common
                                         Shares         Stock       Surplus
                                         ______          ______     _______

                                  <c>             <c>          <c>
Balance at January 1, 2005                4,539,573       $9,079       $12,505

Comprehensive Income:
Net Income
Change in unrealized
   gain (loss) on
   investment securities
   available-for-sale,
   net of reclassification
   adjustment and tax
   effects
Total comprehensive
    income (loss)
  Sale of 6,211 shares
    treasury stock                                                        (116)
  Purchase of 5,000 shares
    of treasury stock
Cash dividends -
   $.60 per share
                                          _________       ______       _______
Balance at September 30, 2005             4,539,573       $9,079       $12,389
                                          =========       ======       =======


<CAPTION>

(Amounts in thousands, except common share data)

                                                               Accumulated
                                     Compre-                       Other
                                     hensive       Retained   Comprehensive
                                     Income         Earnings   Income (Loss)
                                     ______        _______      ___________

                               <c>           <c>            <c>
Balance at January 1, 2005                           $32,469        $3,767

Comprehensive Income:
Net Income                             $5,256          5,256
Change in unrealized
   gain (loss) on
   investment securities
   available-for-sale,
   net of reclassification
   adjustment and tax
   effects                             (1,237)                      (1,237)
                                       ______
Total comprehensive
   income (loss)                       $4,019
                                       ======
   Sale of 6,211 shares
     treasury stock
   Purchase of 5,000 shares
     of treasury stock
Cash dividends -
   $.60 per share                                     (2,637)
                                                     _______        ______
Balance at September 30, 2005                        $35,088        $2,530
                                                     =======        ======


<CAPTION>

(Amounts in thousands, except common share data)

                                                Treasury
                                                  Stock         Total
                                                  _____         _____

                                          <c>            <c>
Balance at January 1, 2005                        $(4,508)       $53,312

Comprehensive Income:
Net Income                                                         5,256
Change in unrealized
   gain (loss) on
   investment securities
   available-for-sale,
   net of reclassification
   adjustment and tax
   effects                                                        (1,237)
Total comprehensive
   income (loss)
   Sale of 6,211 shares
     treasury stock                                   211             95
   Purchase of 5,000 shares
     of treasury stock                               (112)          (112)
Cash dividends -
   $.60 per share                                                 (2,637)
                                                  _______        _______
Balance at September 30, 2005                     $(4,409)       $54,677
                                                  =======        =======

</TABLE>


NOTE 7.  MANAGEMENT'S ASSERTIONS AND COMMENTS
         REQUIRED TO BE PROVIDED WITH FORM 10Q FILING

     In management's opinion, the consolidated interim financial
statements reflect fair presentation of the consolidated financial
position of First Keystone Corporation and Subsidiary, and the
results of their operations and their cash flows for the interim
periods presented.  Further, the consolidated interim financial
statements are unaudited; however they reflect all adjustments,
which are in the opinion of management, necessary to present fairly
the consolidated financial condition and consolidated results of
operations and cash flows for the interim periods presented and that
all such adjustments to the consolidated financial statements are of
a normal recurring nature.  The independent accountants, J. H.
Williams & Co., LLP, reviewed these consolidated financial
statements as stated in their accompanying review report.

     The results of operations for the nine month period ended
September 30, 2005, are not necessarily indicative of the results to
be expected for the full year.

     These consolidated interim financial statements have been
prepared in accordance with requirements of Form 10Q and therefore
do not include all disclosures normally required by generally
accepted accounting principles applicable to financial institutions
as included with consolidated financial statements included in the
Corporation's annual Form 10K filing.  The reader of these
consolidated interim financial statements may wish to refer to the
Corporation's annual report or Form 10K for the period ended
December 31, 2004, filed with the Securities and Exchange
Commission.


                                 13

<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of First Keystone Corporation:


We have reviewed the accompanying consolidated balance sheet of
First Keystone Corporation and Subsidiary as of September 30, 2005,
and the related consolidated statements of income for the three and
nine month periods ended September 30, 2005 and 2004, and the
consolidated statements of cash flows for the nine month periods
ended September 30, 2005 and 2004.  These consolidated interim
financial statements are the responsibility of the management of
First Keystone Corporation and Subsidiary.

We conducted our reviews in accordance with the standards of the
Public Company Accounting Oversight Board (United States).  A review
of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible
for financial and accounting matters.  It is substantially less in
scope than an audit conducted in accordance with the standards of
the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole.  Accordingly, we do not
express such an opinion.

Based on our reviews, we are not aware of any material modifications
that should be made to the consolidated interim financial statements
referred to above for them to be in conformity with accounting
principles generally accepted in the United States of America.

We have previously audited, in accordance with the auditing
standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheet of First Keystone
Corporation and Subsidiary as of December 31, 2004, and the related
consolidated statements of income, changes in stockholders' equity,
and cash flows for the year then ended (not presented herein); and
in our report dated January 24, 2005, we expressed an unqualified
opinion on those consolidated financial statements.  In our opinion,
the information set forth in the accompanying consolidated balance
sheet as of December 31, 2004, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which
it has been derived.



/s/ J. H. Williams & Co., LLP
J. H. Williams & Co., LLP



Kingston, Pennsylvania
October 17, 2005


                                 14

<PAGE>


Item 2.   First Keystone Corporation Management's
          Discussion and Analysis of Financial Condition
          and Results of Operation as of September 30, 2005


     This quarterly report contains certain forward looking
statements (as defined in the Private Securities Litigation Reform
Act of 1995), which reflect management's beliefs and expectations
based on information currently available. These forward looking
statements are inherently subject to significant risks and
uncertainties, including changes in general economic and financial
market conditions, the Corporation's ability to effectively carry
out its business plans and changes in regulatory or legislative
requirements. Other factors that could cause or contribute to such
differences are changes in competitive conditions, and pending or
threatened litigation. Although management believes the expectations
reflected in such forward looking statements are reasonable, actual
results may differ materially.


RESULTS OF OPERATIONS

     First Keystone Corporation realized earnings for the third
quarter of 2005 of $1,804,000, an increase of $14,000 or 0.8% over
the third quarter of 2004.  Nine months net income for the period
ended September 30, 2005, amounted to $5,256,000, a decrease of 3.3%
from the $5,434,000 net income reported September 30, 2004.  Net
interest income tightened in both the third quarter of 2005 and for
the first nine months of 2005.  In addition, non interest income
declined in both the third quarter and year to date in 2005
primarily due to a reduction in both trust department income and
gains on sale of loans.  Finally, investment securities gains were
also less in 2005 than 2004.  A substantial reduction in the
provision for loan losses accounts primarily for the increase in
third quarter 2005 net income.  Also, year to date provision for
loan losses of $500,000 in 2005 as compared to $950,000 in 2004 help
offset the reduction in net interest income and non interest income
as the corporation continued its excellent control over non interest
expense.  On a per share basis, net income per share was $1.20 for
the nine months of 2005, as compared to $1.24 for the first nine
months of 2004, while dividends increased to $.60 per share up from
$.53 in 2004, or an increase of 13.2%.

     Year to date net income annualized amounts to a return on
average common equity of 12.95% and a return on assets of 1.39%.
For the nine months ended September 30, 2004, these measures were
13.80% and 1.47%, respectively on an annualized basis.


NET INTEREST INCOME

     The major source of operating income for the Corporation is net
interest income, defined as interest income less interest expense.
In the third quarter of 2005, interest income amounted to
$6,637,000, an increase of $304,000 or 4.8% from the third quarter
of 2004.  Interest expense amounted to $2,981,000 in the third
quarter of 2005, an increase of $464,000 or 18.4% over the third
quarter of 2004.  Accordingly, net interest income amounted to
$3,656,000 in the third quarter of 2005, a decrease of $160,000, or
4.2% from the third quarter of 2004.  Year to date for the nine
months ended September 30, 2005, total interest income increased
$729,000, or 3.9% from the first nine months of 2004.  Total
interest expense increased $1,005,000, or 13.6% for the first nine
months of 2005 over 2004.  This resulted in net interest income
decreasing $276,000 to $11,176,000 as of September 30, 2005.

     Our net interest margin for the quarter ended September 30,
2005, was 3.46% compared to 3.64% for the quarter ended September
30, 2004.  For the nine months ended September 30, 2005, our net
interest margin was 3.49% compared to 3.61% for the first nine
months of 2004.


                                 15

<PAGE>


PROVISION FOR LOAN LOSSES

     The provision for loan losses for the quarter ended September
30, 2005, was $150,000 compared to $675,000 for the third quarter of
2004.  Year to date, the provision for loan losses amounts to
$500,000 in 2005 as compared to the $950,000 provision for the
period ended September 30, 2004.  Net charge offs amounted to
$651,000 for the nine months ended September 30, 2005, as compared
to $160,000 for the first nine months of 2004.

     The allowance for loan losses as a percentage of loans, net of
unearned interest was 1.58% as of September 30, 2005, and 1.64% as
of December 31, 2004.


NON-INTEREST INCOME

     Total non interest or other income was $915,000 for the quarter
ended September 30, 2005, as compared to $1,313,000 for the quarter
ended September 30, 2004.  Excluding investment security gains and
losses, non interest income was $826,000 for the third quarter of
2005, as compared to $902,000 in the third quarter of 2004, a
decrease of 8.4%.  For the nine months ended September 30, 2005,
total non interest income was $2,634,000, as compared to $3,205,000,
or a 17.8% decrease from the first nine months of 2004.  In both the
third quarter of 2005 and for the nine months ended September 30,
2005, the decrease in non interest income was primarily the result
of a decrease in trust department revenue, reduced gains on sale of
loans, and reduced gains on investment securities.


NON-INTEREST EXPENSES

     Total non interest, or other expenses, was $2,245,000 for the
quarter ended September 30, 2005, as compared to $2,266,000 for the
quarter ended September 30, 2004, a decrease of $21,000, or 0.9%.

     For the nine months ended September 30, 2005, total non
interest expense was $6,965,000, an increase of $76,000, or 1.1%
over the first nine months of 2004.  Expenses associated with
employees (salaries and employee benefits) continue to be the
largest category of non interest expenses.  Salaries and benefits
amount to 52.7% of total non interest expense for the nine months
ended September 30, 2005, as compared to 52.4% for the first nine
months of 2004.  Salaries and benefits amounted to $3,669,000 for
the nine months ended September 30, 2005, an increase of $59,000, or
1.6% over the first nine months of 2004.  Net occupancy expense,
along with furniture and equipment expense and professional services
expense all decreased for the nine months ended September 30, 2005,
from 2004.  Other non interest expense and state shares tax expense
increased moderately in 2005.  Our overall non interest expense
continues at less than 2% of average assets on an annualized basis.
This places us among the leaders of our peer financial institutions
at controlling non interest expense.


INCOME TAXES

     Effective tax planning has helped produce favorable net income.
The effective total income tax rate was 17.1% for the third quarter
of 2005 as compared to 18.2% for the third quarter of 2004.  For the
nine months ended September 30, 2005, our tax liability amounted to
$1,089,000 for an effective tax rate of 17.2% as compared to an
effective tax rate of 20.3% for the first nine months of 2004.  The
decrease in our effective tax rate was due primarily to the tax
savings derived from our investment in bank owned life insurance and
additional investment in municipal securities.


                                 16

<PAGE>


ANALYSIS OF FINANCIAL CONDITION

ASSETS

     Total assets increased to $526,722,000 as of September 30,
2005, an increase of $29,107,000, or 5.8% over year end 2004.  Total
deposits increased to $375,613,000 as of September 30, 2005, an
increase of $17,657,000, or 4.9% over year end 2004.

     The Corporation used the increase in total deposits to fund
primarily an increase in earnings assets, in particular, investment
securities.  Borrowings decreased $4,397,000 from December 31, 2004.
Short term borrowings decreased to $12,490,000 as of September 30,
2005, down $3,022,000 from year end 2004.  Long term borrowings
decreased to $65,535,000 as of September 30, 2005, down $1,375,000
from year end 2004.


EARNING ASSETS

     Our primary earning asset, loans, net of unearned income
decreased to $232,084,000 as of September 30, 2005, down $1,716,000,
or 0.7% from year end 2004.  The loan portfolio is well diversified
and the decreases in the portfolio has been primarily from reduced
originations of real estate loans.

     In addition to loans, another primary earning asset is our
investment portfolio which has increased in size from December 31,
2004, to September 30, 2005.  Held to maturity securities amounted
to $3,257,000 as of September 30, 2005, a decrease of $104,000, or
3.1% from year end 2004.  However, available for sale securities
increased to $253,532,000 as of September 30, 2005, an increase of
$17,840,000, or 7.6% since year end 2004.  Interest bearing deposits
with banks increased to $11,774,000 on September 30, 2005, as
compared to $36,000 as of December 31, 2004.


ALLOWANCE FOR LOAN LOSSES

     Management performs a quarterly analysis to determine the
adequacy of the allowance for loan losses.  The methodology in
determining adequacy incorporates specific allocations together with
a risk/loss analysis on various segments of the portfolio according
to an internal loan review process.  Management maintains its loan
review and loan classification standards consistent with those of
its regulatory supervisory authority.  Management feels, considering
the conservative portfolio composition, which is largely composed of
small retail loans (mortgages and installments) with minimal
classified assets, low delinquencies, and favorable loss history,
that the allowance for loan loss is adequate to cover foreseeable
future losses.

     Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under
Industry Guide 3 do not (i) represent or result from trends or
uncertainties which management reasonably expects will materially
impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which management is aware of
any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment
terms.

     The company was required to adopt Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" - Refer to Note 5 above for details.


                                 17

<PAGE>


NON-PERFORMING ASSETS

     Non performing assets consist of non accrual and restructured
loans, other real estate and foreclosed assets, together with the
loans past due 90 days or more and still accruing.  As of September
30, 2005, total non performing assets were $1,980,000 as compared to
$3,480,000 on December 31, 2004.  Non performing assets to total
loans and foreclosed assets was .85% as of September 30, 2005, and
1.49% as of December 31, 2004.

     Interest income received on non performing loans as of
September 30, 2005, was $2,000 compared to $113,000 as of December
31, 2004.  Interest income, which would have been recorded on these
loans under the original terms as of September 30, 2005, and
December 31, 2004, was $101,000 and $253,000, respectively.  As of
September 30, 2005 and December 31, 2004, there was no outstanding
commitments to advance additional funds with respect to these non
performing loans.

DEPOSITS AND OTHER BORROWED FUNDS

     As indicated previously, total deposits increased by
$17,657,000 as non interest bearing deposits increased by $6,770,000
and interest bearing deposits increased by $10,887,000 as of
September 30, 2005, from year end 2004.  Total short term and long
term borrowings decreased by $4,397,000 from year end 2004.


CAPITAL STRENGTH

     Normal increases in capital are generated by net income, less
cash dividends paid out.  Also, accumulated other comprehensive
income derived from unrealized gains on investment securities
available for sale increased shareholders' equity, or capital net of
taxes, by $2,530,000 as of September 30, 2005, and $3,767,000 as of
December 31, 2004.  Our stock repurchase plan repurchased 147,053
shares as treasury stock as of September 30, 2005 and 148,264 shares
as treasury stock as of December 31, 2004.  This had an effect of
our reducing our total stockholders' equity by $4,409,000 on
September 30, 2005, and $4,508,000 as of December 31, 2004.

     Total stockholders' equity was $54,677,000 as of September 30,
2005, and $53,312,000 as of December 31, 2004.  Leverage ratio and
risk based capital ratios remain very strong.  As of September 30,
2005, our leverage ratio was 9.98% compared to 9.61% as of December
31, 2004.  In addition, Tier I risk based capital and total risk
based capital ratio as of September 30, 2005, were 17.40% and
18.81%, respectively.  The same ratios as of December 31, 2004, were
16.23% and 17.68%, respectively.


LIQUIDITY

     The liquidity position of the Corporation remains adequate to
meet customer loan demand and deposit fluctuation.  Managing
liquidity remains an important segment of asset liability
management.  Our overall liquidity position is maintained by an
active asset liability management committee.

     Management feels its current liquidity position is
satisfactorily given a very stable core deposit base which has
increased annually.  Secondly, our loan payments and principal
paydowns on our mortgage backed securities provide a steady source
of funds.  Also, short term investments and maturing investment
securities represent additional sources of liquidity.  Finally,
short term borrowings are readily accessible at the Federal Reserve
Bank discount window, Atlantic Central Bankers Bank, or the Federal
Home Loan Bank.


                                 18

<PAGE>


ITEM 3.   Quantitative and Qualitative Disclosures
          About Market Risk

     There have been no material changes in the Company's
quantitative and qualitative market risks since December 31, 2004.
The composition of rate sensitive assets and rate sensitive
liabilities as of September 30, 2005 is very similar to December 31,
2004.


ITEM 4.   Controls and Procedures

     a)   Evaluation of disclosure controls and procedures.  The
company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the company
files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange
Commission.  Based upon their evaluation of those controls and
procedures performed within 90 days of the filing date of this
report, the chief executive and chief financial officers of the
company concluded that the company's disclosure controls and
procedures were adequate.

     b)   Changes in internal controls.  The Company made no
significant changes in its internal controls or in other factors
that could significantly affect these controls subsequent to the
date of the evaluation of the controls by the Chief Executive and
Chief Financial officers.


                                 19

<PAGE>


                     PART II - OTHER INFORMATION

     Item 1.   Legal Proceedings

               None.


     Item 2.   Changes in Securities, Use of Proceeds and
               Issuer Purchases of Equity Securities

<TABLE>
<CAPTION>
                                                Total
                                                 Number         Maximum
                                              of Shares        Number of
                                              Purchased       Shares That
                                               as Part of       May Yet Be
                    Total                       Publicly        Purchased
                     Number      Average       Announced        Under the
                  of Shares      Price Paid     Plans or        Plans or
     Period       Purchased     per Share       Programs        Programs
     ______       _________     _________       ________        ________

               <c>           <c>           <c>           <c>
July 1 -
July 31,
2005              ----          ----          ----          100,000

August 1 -
August 31,
2005              3,000         22.65         3,000         97,000

Sept. 1 -
Sept. 30,
2005              2,000         22.10         2,000         95,000

Total             5,000         22.38         5,000         95,000

</TABLE>

     Item 3.   Defaults Upon Senior Securities

               None.


     Item 4.   Submission of Matters to a Vote of Security Holders

               Annual Meeting of Shareholders of First Keystone
               Corporation held on Tuesday, April 19, 2005, at
               10:00 a.m.

<TABLE>
<CAPTION>
                                                     Votes        Votes
Directors Elected                   Votes For       Against      Withheld
_________________                   _________        ______      _______

                             <c>              <c>             <c>
Don E. Bower                    3,749,367        37,108          0
John L. Coates                  3,672,725        113,750         0
Dudley P. Cooley                3,749,535        36,940          0


<CAPTION>
                                                 Broker
Directors Elected               Abstentions      Non-Votes
_________________               ___________      _________

                             <c>              <c>
Don E. Bower                    0                0
John L. Coates                  0                0
Dudley P. Cooley                0                0

</TABLE>


                                20


<PAGE>


Directors Continuing:
____________________

Budd L. Beyer, term expires in 2006
Frederick E. Crispin, Jr., term expires in 2006
Jerome F. Fabian, term expires in 2006
Robert J. Wise, term expires in 2006
John E. Arndt, term expires in 2007
J. Gerald Bazewicz, term expires in 2007
Robert E. Bull, term expires in 2007

Matters Voted Upon:
__________________

Selection of J. H. Williams & Co. LLP, as auditors for the
Corporation.

Votes For - 3,753,249
Votes Against - 3,064
Votes Withheld -  0
Abstentions - 30,162
Broker Non-Votes -  0


     Item 5.   Other Information

               The Company made no material changes to the
               procedures by which shareholders may recommend
               nominees to the Company's Board of Directors.


                                 21

<PAGE>


     Item 6.   Exhibits and Reports on Form 8-K

               (a)  Exhibits required by Item 601 Regulation S-K


Exhibit Number     Description of Exhibit

3i                Articles of Incorporation, as amended
                   (Incorporated by reference to Exhibit 3(i) to
                   the Registrant's Report on Form 10Q for the
                   quarter ended March 31, 2001).

3ii               By-Laws, as amended (Incorporated by reference
                   to Exhibit 3(ii) to the Registrant's Report on
                   Form 10Q for the quarter ended March 31, 2001).

10.1            Supplemental Employee Retirement Plan

10.2            Management Incentive Compensation Plan
                    (Incorporated by reference to Exhibit 10 to
                     Registrant's Report on Form 10Q for the quarter
                     ended September 30, 2001).

10.3             Profit Sharing Plan (Incorporated by reference
                     to Exhibit 10 to Registrant's Report on Form 10Q
                     for the quarter ended September 30, 2001).

10.4             First Keystone Corporation 1998 Stock Incentive
                     Plan (Incorporated by reference to Exhibit 10 to
                     Registrant's Report on Form 10Q for the quarter
                     ended September 30, 2001).

 14               Code of Ethics (Incorporated by reference to
                     Exhibit 14 to the Registrant's Annual Report on
                     10K for the year ended December 31, 2003).

 31.1              Rule 13a-14(a)/15d-14(a) Certification of Chief
                       Executive Officer.

 31.2              Rule 13a-14(a)/15d-14(a) Certification of Chief
                       Financial Officer.

 32.1              Section 1350 Certification of Chief Executive
                       Officer.

 32.2              Section 1350 Certification of Chief Financial
                       Officer.


        (b)  During the quarter ended September 30, 2004, the
registrant filed the following reports on Form 8-K:

Date of Report  Item      Description
______________  ____      ___________

July 29, 2005   5         On July 29, 2005, the Registrant issued
                          a press release announcing its earnings
                          for the quarter ended June 30, 2005.

July 29, 2005   5         On July 29, 2005, the Registrant issued
                          a press release announcing a newly
                          approved stock repurchase plan.


                                 22

<PAGE>


                      FIRST KEYSTONE CORPORATION

                              SIGNATURES


    Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly cause this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                             FIRST KEYSTONE CORPORATION
                             Registrant


November 8, 2005             /s/ J. Gerald Bazewicz
                             J. Gerald Bazewicz
                             President and
                             Chief Executive Officer
                             (Principal Executive Officer)



November 8, 2005             /s/ David R. Saracino
                             David R. Saracino
                             Treasurer/Chief Financial Officer
                             (Principal Accounting Officer)


                                 23

<PAGE>


                          INDEX TO EXHIBITS

Exhibit            Description
_______            ___________

3i                 Articles of Incorporation, as amended
                   (Incorporated by reference to Exhibit 3(i) to
                   the Registrant's Report on Form 10Q for the
                   quarter ended March 31, 2001)

3ii                By-Laws, as amended (Incorporated by reference
                   to Exhibit 3(ii) to the Registrant's Report on
                   Form 10Q for the quarter ended March 31, 2001)

9                  None.

10.1               Supplemental Employee Retirement Plan

10.2               Management Incentive Compensation Plan
                   (Incorporated by reference to Exhibit 10 to
                   Registrant's Report on Form 10Q for the quarter
                   ended September 30, 2001)

10.3               Profit Sharing Plan (Incorporated by reference
                   to Exhibit 10 to Registrant's Report on Form 10Q
                   for the quarter ended September 30, 2001)

10.4               First Keystone Corporation 1998 Stock Incentive
                   Plan (Incorporated by reference to Exhibit 10 to
                   Registrant's Report on Form 10Q for the quarter
                   ended September 30, 2001)

 14                Code of Ethics (Incorporated by reference to
                   Exhibit 14 to the Registrant's Annual Report on
                   10K for the year ended December 31, 2003).

 31.1              Rule 13a-14(a)/15d-14(a) Certification of Chief
                   Executive Officer.

 31.2              Rule 13a-14(a)/15d-14(a) Certification of Chief
                   Financial Officer.

 32.1              Section 1350 Certification of Chief Executive
                   Officer.

 32.2              Section 1350 Certification of Chief Financial
                   Officer.


                                 24